A cell line derived from a human hepatoblastoma, HepG2, was examined for its ability to activate cyclophosphamide (CY) to a genotoxic form. Metabolism of CY to genotoxic product(s) was determined by the induction of sister-chromatid exchanges (SCE). The dose-dependent response pattern in HepG2 was compared to the patterns obtained by three other mammalian cell lines. HepG2 and a rat hepatoma cell line, H4-II-E, show similar dose-dependent increases of induced SCE, whereas non-hepatic-derived fibroblast lines show little or no CY-induced SCE. Microsomal enzyme activities characteristic of cytochromes P450 and P448 and epoxide hydrolase were examined in the two hepatoma cell lines and compared to levels in rat liver microsomal preparations. Although no cultured cell line can be a universal surrogate for in vivo metabolism, we propose that HepG2 may be useful to determine in a qualitative manner whether human cells possess the ability to activate a chemical to a genetically damaging form.